Sunday, July 05, 2009

Jobs' Report Was a Bit of a Sell Trigger

Top Line: Market should continue to drop over the course of the next week or two.

Thursday's jobs' report released about an hour before the opening bell did seem to be a trigger for some selling as the market opened with a thud. The rest of the day wasn't much better although the damage was done early in the day. In the first 45 minutes of trading, the Dow was lower by 180 and managed to drop nearly 225 by the end of the day. So from Wednesday's high to Thursday's close the Dow dropped about 300 points. As for the NDX (NASDAQ 100), it dropped 35 points in the first 45 minutes and that's about where it closed.

As you might imagine the volatility indexes did climb strongly on Thursday after Wednesday's reversal. For example, the VXO traded down around 23.75 on Wednesday morning and then closed Thursday near 27.50. We expect this "rally" in fear to continue as the market puts in lower and lower prices over the next couple of weeks.

There has been too much bullishness since May and the buyers during that period of time should be pressured by now into reconsidering their positions. If, or as, the market drops in the next couple of weeks, there will be more and more urge to sell as people start believing in the continued recession theory. This week we should start seeing some second quarter earnings numbers which probably won't help the market out. In fact, this could generate more fear and therefore more selling pressure.

As we write this evening, the overnight US futures are down somewhat as the Asian markets are down a little, too. The Hang Seng (Hong Kong) index has recovered some of its lost ground but not the Nikkei (Japan). Monday morning should be pretty interesting as the US market opens on the back of the global markets lead.

We didn't provide any more pictures of Jackson but we will put some more up on Monday evening.

We hope you had a great weekend and now are ready for a couple of weeks of treacherous trading. Let's get back to it, shall we...



The employment situation could not be much worse.

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